BRUSSELS—The European Union is preparing to add at least five individuals and two entities to its Ukraine sanctions list, for the first time targeting oligarchs who the bloc says are supporting or benefiting from the turmoil in Ukraine, EU diplomats said Monday.

The move comes as the EU is putting the finishing touches on sectorwide economic sanctions that would target Russia's financial system, place a trade embargo on arms, and restrict exports to Russia of militarily sensitive goods and equipment used in unconventional...